On Holding AG Faces Margin Cuts Despite Strong Sales Growth

On Holding AG's Q1 results show a dip in profit despite increased sales. The company's trimmed fiscal 2025 outlook on margins raises concerns. However, strong demand continues and an increase in sales forecasts looks promising for investors.

Date: 13-05-2025

AI Rating: 5

Profit Performance and Earnings Analysis
On Holding AG reported a significant decline in net income, which plummeted by 38% to CHF 56.7 million in Q1. Correspondingly, the earnings per Class A share fell to CHF 0.17 from CHF 0.28 a year ago. This substantial drop in net income raises alarms among investors as it may indicate issues with profitability despite high revenue growth.

The company did report an impressive 43% increase in net sales, reaching CHF 726.6 million, showcasing strong market demand. However, this growth must be balanced against the falling profits. Adjusted EBITDA markedly improved, with a 54.8% increase, reflecting some operational efficiency gains. The adjusted EBITDA margin also improved slightly, now reaching 16.5%, compared to 15.2% in the previous year.

Looking ahead, the company has raised its net sales outlook, now anticipating at least 28% growth on a constant currency basis for fiscal 2025. While this optimism reflects ongoing brand strength, the reduction in its EBITDA margin expectations (from 17-17.5% down to 16.5%-17.5%) raises flags about the company’s ability to convert revenue growth into sustainable profit.

Conclusion
This mixed bag of financial results—strong sales growth coupled with decreasing profit margins—creates a complex narrative for investors. Therefore, while the increase in sales and the ability to meet market demand are clear positives, the reduced profitability outlook may lead to caution among investors. The focus should be placed on monitoring future quarters to assess whether the firm can pivot these sales into improved profit margins.

Stocks: ONON